Thursday, April 13, 2006

[Canada] Poverty groups unsatisfied with GST cut

Nipawin Journal

Anti-poverty groups are hesitant about the government’s proposed GST cut, saying it’s only “nickel and dime” relief for low income earners.

By Jennifer Wilson

Poverty groups unsatisfied with GST cut

Anti-poverty groups are hesitant about the government’s proposed GST cut, saying it’s only “nickel and dime” relief for low income earners.

In the Speech from the Throne on April 4, the new Conservative government announced they would live up to their campaign promise to cut the GST from seven per cent to six per cent.

But some groups say this won’t translate to a lot of extra money in the pockets of Canada’s poor.

“I think the difference is going to be more for people with a bigger income and more spendable dollars,” said Vanessa Charles, co-chair of the Saskatoon Anti-Poverty Coalition.

“I don’t think that low income people are going to find that much of a difference. Their disposable dollars are not that much.”

Local MP Brian Fitzpatrick defended his party’s policy, saying that unlike the proposed Liberal income tax cut, their plan was “universal.”

“Our point is that the GST applies to everyone,” he said. “The goods and services that the GST applies to, all of us need from time to time. It’s a movement toward giving tax relief to our taxpayers.”

But not all goods and services have GST tacked on. Items such as food, rent and children’s clothing are GST free - many of the things that low income earners spend the bulk of their paychecks on.

“Only a certain amount of a person’s income will be spent on GST taxable purchases,” said Matthew Murray, of the National Anti-Poverty Organization.

“For a poor person, it’s a process of counting pennies. How long does it really take before they have a savings from the GST tax cut where they can actually make a purchase at all? It’s just a very minimal effort.”

He added that most tax cuts tend to favour those who make more money.
“It’s really you save what you pay,” he said. “The people that already have money and that spend more money will still be making the most savings.”

The Liberal tax plan would have cut the basic income tax rate from 16 per cent to 15 per cent and increased the personal exemption by $500.

Fitzpatrick was quick to point out that this wouldn’t benefit Canada’s lowest tax bracket - those making $10,000 a year or less don’t pay income tax.

“The point of the whole matter is, the low income Canadian is under those thresholds anyway,” he said. “There would be no tax relief for them. You don’t make that much money, you don’t pay income tax.”

The numbers indicate that the GST cut benefits those on either end of the tax spectrum; not so much for the average worker.

Consider this: for someone earning $40,000 a year, the projected income tax relief under the Liberal plan would be $359. That same person would have to buy $35,900 worth of consumer goods or services, or spend almost 90 per cent of their income, to get a similar $359 in GST savings.

Despite how you crunch the numbers, Murray said we need to look at the bigger picture of those living in poverty. He said tax cuts in general are not the best way to help low income earners.

“Some of the most important issues that we see are the actual amount of money that people are earning,”

Murray explained. “It’s not so much that they can save $113 on taxes, it’s a matter of this person deserves an income whereby they won’t be living in poverty.”
He added that directed tax benefits, like the GST rebate, or raising
minimum wage are “superior” ways to help the poor.

“Whether you give $10 or take $10 back, it leaves people in the same situation,” he said. “What they really need to do is start raising social assistance rates so people can live in dignity.”

But don’t consider this tax debate closed yet. The Liberals are
determined to still see their tax plan implemented.

Senator Jack Austin said he will use the Liberal-dominated Senate to
introduce a bill to pressure the Conservatives into implementing both tax plans.
The Tories have said they plan to pay for the GST cut by rescinding the income tax cuts promised last November, but which have yet to be legislated.

The Liberals hope to put them in the potentially embarrassing position where they would have to vote against reducing taxes.

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